DERIVATIVES

As of March 31, 2018, New Residential’s derivative instruments included economic hedges that were not designated as hedges for accounting purposes. New Residential uses economic hedges to hedge a portion of its interest rate risk exposure. Interest rate risk is sensitive to many factors, including governmental monetary and tax policies, domestic and international economic and political considerations, as well as other factors. New Residential’s credit risk with respect to economic hedges is the risk of default on New Residential’s investments that results from a borrower’s or counterparty’s inability or unwillingness to make contractually required payments.

As of March 31, 2018, New Residential held to-be-announced forward contract positions (“TBAs”) of $2.2 billion in a short notional amount of Agency RMBS and any amounts or obligations owed by or to New Residential are subject to the right of set-off with the TBA counterparty. New Residential’s net short position in TBAs was entered into as an economic hedge in order to mitigate New Residential’s interest rate risk on certain specified mortgage backed securities. As of March 31, 2018, New Residential separately held TBAs of $1.1 billion in a long notional amount of Agency RMBS and any amounts or obligations owed by or to New Residential are subject to the right of set-off with the TBA counterparty. As part of executing these trades, New Residential has entered into agreements with its TBA counterparties that govern the transactions for the TBA purchases or sales made, including margin maintenance, payment and transfer, events of default, settlements, and various other provisions. New Residential has fulfilled all obligations and requirements entered into under these agreements.

New Residential’s derivatives are recorded at fair value on the Condensed Consolidated Balance Sheets as follows:



	Balance Sheet Location	March 31, 2018		December 31, 2017
Derivative assets
Interest Rate Swaps^(A)	Other assets	$	3	$	—
Interest Rate Caps	Other assets	585		2,423
TBAs	Other assets	—		—
		$	588	$	2,423
Derivative liabilities
Interest Rate Swaps^(A)	Accrued expenses and other liabilities	$	—	$	—
TBAs	Accrued expenses and other liabilities	4,091		697
		$	4,091	$	697


(A)	Net of less than $0.1 million of related variation margin accounts as of March 31, 2018. As of December 31, 2017, no variation margin accounts existed.

The following table summarizes notional amounts related to derivatives:



	March 31, 2018		December 31, 2017
TBAs, short position^(A)	$	2,176,700	$	3,101,100
TBAs, long position^(A)	1,066,300		1,014,000
Interest Rate Caps^(B)	347,500		772,500
Interest Rate Swaps^(C)	430,000		—


(A)	Represents the notional amount of Agency RMBS, classified as derivatives.


(B)	As of March 31, 2018, caps LIBOR at 2.00% for $185.0 million of notional, at 4.00% for $12.5 million of notional, and at 4.00% for $150.0 million of notional. The weighted average maturity of the interest rate caps as of March 31, 2018 was 13 months.


(C)	Receive LIBOR and pay a fixed rate. The weighted average maturity of the interest rate swaps as of March 31, 2018 was 37 months and the weighted average fixed pay rate was 2.67%.

The following table summarizes all income (losses) recorded in relation to derivatives:



	For the Three Months Ended March 31,
	2018			2017
Other income (loss), net^(A)
TBAs	$	1,994		$	123
Interest Rate Caps	486			573
Interest Rate Swaps	(34		)	3,630
	2,446			4,326
Gain (loss) on settlement of investments, net
TBAs	15,436			(6,801		)
Interest Rate Caps	(733		)	(562		)
Interest Rate Swaps	22,660			(4,473		)
	37,363			(11,836		)
Total income (losses)	$	39,809		$	(7,510	)


(A)	Represents unrealized gains (losses).